Introduction to Applied Economics

Practice flashcards covering the foundations of economics, including branches, economic systems, the Production Possibilities Frontier, and basic economic problems.

What are the Greek origins of the word 'Economics' and what do they mean?

It comes from 'OIKONOMIA' or 'OIKONOMUS'; 'OIKOS' means 'Household' and 'NOMUS' means 'Management.'

Why is Economics classified as a Social Science?

Because it is the study of society and the manner in which people behave and influence the world around them.

What is defined as the 'heart of the study of Economics'?

Scarcity, which is the limited availability of economic resources relative to unlimited demand.

What are the four factors of production and their associated rewards or components?

Land (nature-based resources), Labor (human effort/salary), Capital (man-made goods/interest), and Entrepreneur (organizer who assumes risk).

What is the difference in focus between Microeconomics and Macroeconomics?

Microeconomics focuses on individual economic units and specific parts of the economy, whereas Macroeconomics focuses on the economy as a whole.

Who are the decision makers in Macroeconomics?

Government and Policymakers.

What are the 'Three E’s of Economics'?

Efficiency (minimal waste/productivity), Effectiveness (attainment of goals), and Equity (justice and fairness).

How does the 'Traditional Economy' determine what to produce?

Production is based on tradition and the practices of previous generations, focusing on meeting basic needs.

How are prices and production levels determined in a Market Economy?

They are determined primarily by supply and demand, with businesses operating in a free market.

In which economic system does the government own or control most resources and make major production decisions?

Command Economy.

Match the ownership style to Capitalism and Communism.

Capitalism involves private ownership (individuals/corporations), whereas Communism involves common ownership with no private property.

What is the Production Possibilities Frontier (PPF)?

An economic model illustrating different combinations of two goods an economy can produce using available resources and technology.

What are the four primary assumptions of the PPF model?

1. Only two goods are produced; 2. All available resources are fully employed; 3. Quality and quantity of resources remain constant; 4. Technology is constant.

What does production occurring 'inside' the PPF curve indicate?

Inefficiency, meaning some resources remain unused (workers or machines are not in use).

How is 'Opportunity Cost' defined within the context of the PPF?

The value of the next best alternative that is sacrificed to produce more of another good.

What causes the PPF to shift outward?

Economic growth, driven by technological improvements that allow producers to create more goods with the same resources.

What are three common causes of unemployment cited in the text?

Labor Force Growth, Rural-to-Urban Migration, and Skill Mismatch.

Why does poor quality infrastructure hinder economic growth?

It creates a higher cost of doing business, results in lower productivity, and limits job creation.

What are some causes of income inequality?

Unequal access to education, limited employment opportunities, unequal ownership of assets, wage disparities, and regional economic imbalance.